EIA data: crude supply up less than expected, gasoline stocks drop

SAN FRANCISCO (MarketWatch) — Oil futures rose Wednesday, settling above $90 a barrel for their highest close in nearly two weeks, after the U.S. government reported an increase in crude supplies that was smaller than expected along with a big decline in gasoline stockpiles.

Crude for June delivery
CLM3, +0.18%
jumped $2.25, or 2.5%, to settle at $91.43 a barrel on the New York Mercantile Exchange.

Prices, which ended nearly flat on Tuesday, haven’t settled at a level this high since April 11, based on the most-active contracts, according to FactSet data. They also logged their biggest one-day percentage climb of the year.

Oil futures have still fallen more than 6% this month, hurt in part by concerns about lackluster oil demand in a well-supplied market.

On Wednesday, the U.S. Energy Information Administration reported crude supplies rose by 900,000 barrels for the week ended April 19. Analysts polled by Platts expected a 1.4-million-barrel climb.

Motor gasoline supplies dropped by 3.9 million barrels, but distillate stockpiles added 100,000 barrels, the EIA data showed. Forecasts called for a decline of 700,000 barrels in gasoline stockpiles and a fall of 450,000 barrels in distillate supplies.

It isn’t a surprise to see a continuation of strength following the government figures, “especially with the weakness we have seen over the past week,” said Tariq Zahir, managing member at Tyche Capital Advisors.

After oil’s settlement on Tuesday, the American Petroleum Institute reported that crude supplies fell 845,000 barrels last week. The trade group also said gasoline inventories declined 2.7 million barrels while distillate stockpiles, which include heating oil, rose by 666,000 barrels.

On Nymex, May gasoline
US:RBK3
rose 3 cents, or 1%, to $2.75 a gallon. May heating oil
US:HOK3
also picked 3 cents, or 1.1%, to $2.84 a gallon.

Demand signals

“Fundamentally, the picture really has not changed” for oil, Zahir said.

The consumption figures from EIA report were bearish across the board, said James Williams, energy economist at WTRG Economics.

Motor gasoline product supplied, an indicator of demand, averaged over 8.5 million barrels per day over the last four weeks, the EIA said. That is down 1.7% from the same time a year ago. Distillates supplied, which include heating oil and diesel, were down 2.6% from the year-ago period.

That, “coupled with a 19.1% year-over-year increase in crude-oil production, which is an ongoing threat to [the Organization of the Petroleum Exporting Countries], makes the report bearish overall,” said Williams. He pointed out that diesel consumption is an excellent indicator of the economy and now indicates “an underlying weakness in the U.S. economy.”

Reuters

The Motiva oil refinery in Port Arthur, Texas.

On a week-to-week basis, however, implied gasoline demand rose to 8.75 million barrels per day, up 4.4% from a week earlier, according to the EIA data. That was the biggest increase and demand level since the pre-Thanksgiving jump in 2012, according to Dow Jones.

Gasoline demand has strengthened in the wake of the recent drop in prices, said Phil Flynn, senior market analyst at Price Futures Group. “The summer driving season may happen after all.”

At the retail level Wednesday, the average price for gallon of regular gasoline cost $3.516, down from $3.667 a month ago, according to AAA’s Daily Fuel Gauge Report.

Meanwhile, oil demand may strengthen as the drop in crude runs to refineries due to storms in the Midwest and a recent shutdown at Motiva Enterprises’s Port Arthur, Texas refinery should reverse, said Flynn.

Oil prices may be finding support from hopes of a further loosening of Euroepan monetary policy. Tuesday’s poor economic data from the region stoked hopes of an interest-rate cut when the European Central Bank meets next week, said Matt Smith, a commodity analyst at Schneider Electric, in a note ahead of the latest supply report.

A report Wednesday showed that German business confidence fell more than expected in April. U.S. durable-goods orders declined by 5.7% in March, the biggest drop since last August. Economists surveyed by MarketWatch looked for a 3.2% decline.

Rounding out action on Nymex Wednesday, natural gas for May delivery
US:NGK13
fell by 7 cents, or 1.7%, at $4.17 per million British thermal units, looking to extend its 0.7% decline seen a day earlier.

The EIA’s weekly supply data on natural gas comes out Thursday. Analysts polled by Platts forecast an increase of between 27 billion cubic feet and 31 billion. The same week a year ago saw a climb of 43 billion, Platts said.

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